How does the human psyche react when normalcy is compromised? How does the mind treat manufactured drama? I was able to answer both of these questions with my latest Personal Finance Experiment.

The Premise:
Put $25,000 in someone’s checking account for two weeks to see if it changes their spending habits. The money isn’t necessarily meant to be spent on anything, but it is placed there to add a layer of comfort and security that one normally doesn’t have.

The Test Subject:
Me. Who else would I give $25,000 to? I simply took $25,000 out of my emergency reserves from another account, and placed it in my checking account for two weeks. Before we go to much further, it is important that we clear up a few points:
1. This experiment wasn’t about me telling you that I have $25k to throw around. In fact, if I didn’t have $25k at my disposal, then I would possibly be the worst Personal Finance Expert on the planet. Why would you take advice from someone that hasn’t demonstrated the ability to effectively save money?
2. I am not exactly a financial angel. I have my weak moments. Most relationships have a spender and a saver. My wife is the saver, and I traditionally have been the spender.
3. The experiment is not necessarily about spending the money. The experiment is meant to measure the change in everyday spending habits based on access to a ridiculously large amount of cash inside of a checking account.
4. I don’t have any debt other than my mortgage, so I was never tempted to “just pay off my debt.”

I’m still a monkey

I am a dumb animal. I really am. Any degree of financial success that I have had is based on me tricking myself to financial security. For instance, I normally keep my checking account super-low so that I don’t blow-through money that I don’t NEED. In addition, I don’t have credit cards. I don’t trust myself to win the mental battle between the credit card companies and my small dinosaur brain. You see, credit card companies are in the business of taking my money from me. They know exactly what they are doing. They offer points and rewards and other forms of BS in order to get my hard earned money. In lieu of a battle of the minds that I would probably lose, I have decided to just not participate in their game.

So the first challenge that I encountered was my own animalness. Yeah, animalness. New word. Work with it. I had protected myself for so long from dumb decisions that I was actually nervous that my brain couldn’t handle the challenge. By the way, not enough people protect themselves from themselves. I highly recommend it. Trick yourself into financial success.

It’s on

So I deposited the $25,000 into my checking account.  No big deal really. I didn’t feel any different in regards to my spending habits, but I was a bit nervous about having that sort of scrilla in my checking account. I didn’t want some bandit to force me into cleaning out my account by using some of the most brutal slap and tickle techniques around. I decided to carry my Swatch Swiss Army Knife that I bought back in the summer of 1987. In the event that I was accosted, I figured that I would use the scissors to cut the criminal, or use the tweezers to clean up his brow line.

Although I did tell you that I’m the spender in my relationship, it’s important that you know that I don’t really spend as much money as I used to. My spending is usually limited to food, wine, gifts for Mrs. Planner, or possibly a nice tie that would look snappy on television. That being said, two questions now arise:

1. Would I spend more money on the areas that I already tend to spend money?

2. Would I add spending categories to my spending habits?

My answers? Yes and No. Yes to #1. No to #2. I didn’t ever feel compelled to start buying things that I normally wouldn’t buy, but my radio co-host, Chip Maxwell, was making headway on his mission to get me to join him in the ranks of iPad owners. I can say with great confidence that every purchase I made during the experiment was affected by the $25,000. Check that. Maybe I should say that differently. Most purchases are make are generally affected by the low balance that I normally keep in my checking account. Therefore, the $25,000 addition lulled me to financial apathy. I didn’t consider the principles of scarcity that I normally employ when making a spending decision.. This, alone, was worth the experiment. I value scarcity. I believe it to be a valuable financial tool. Removing scarcity could be damaging to my financial life. This was very scary. Many people don’t know that they are subjecting their savings to the possibility of extinction simply by keeping it in their checking account.

I’m somewhat famous for my $62/week grocery store trip. My $62 trip became $80/week during my two week experiment. I know this was because I didn’t take the time to consider the necessity of the things that I was purchasing. I had grown accustom to considering the importance of every item that I put into my cart. I believe that we should all scrutinize the items that we purchase. By having the $25k cushion, I learned that my scrutiny was tied directly to low account balance.

I did buy Mrs. Planner flowers two more times than normal over the course of the two weeks. I consider this a good thing. I believe that I purchased at least two more bottles of wine than I normally would have. My palate tells me that it was good thing too, but it wasn’t. I made two additional nominal charitable contributions. I didn’t mind that, but we have a pretty structured giving plan so it surprised me that I deviated from it.

The bottom line

I made at least 8 purchases in the two week experiment that I normally wouldn’t have made. Many people keep too much money in their checking account all the time. If I kept up my new spending pace over the course of an entire year, then I would have spent money 208 more times than usual. Money changes behavior. It just does. I did prove to myself that my assumptions about myself were true. I am a dumb animal. I need to continue to trick myself into financially favorable situations.

I would love to hear what you think about this post. How would your behavior change if you were faced with a $25k experiment?

Count your Transactions – In lieu of budgeting, consider counting the number of times that you spend money over the course of one week.

Go to AnnualCreditReport.com – Starting out on the wrong side of debt and credit can mean decades of anguish. Get your credit report every year.

Embrace “I can’t afford it” – Your goal is not material accumulation. Your goal is not money. Your goal is financial awareness.

Give of your talents – You must appeal to your charitable calling early. Your willingness to think of others will benefit you financially. You will view your money life with scarcity. Giving to charity is not necessarily about giving money. Give your time and talent.

Start the Ween – The longer you depend on your parents, the worse things will be for both parties. Your goal post graduation is COLD TURKEY.

Measure your use of Social Media – One of the first thing your potential employer will look at is Facebook. Lock it down. You need to also build your LinkedIn page.

Grad School is not a holding area – Furthering your education is very important, but securing a graduate degree without a purpose is a major financial error that will span decades

A recent AP story details the plan of Toys R Us to readopt layaway for the holiday season. And I say HOORAYYYYYY. Too over-the-top? Sorry. Yeah.

Layaway is a tool used by retailers to keep customers buying during tough credit times. The practice started back in, you guessed it, the Great Depression. Customers make a down payment on an item, and then continue to make payments on the item prior to taking possession of it when it is paid in full. It is quite the alternative to taking possession of an item prior to actually owning it. Back in the day (1980s), layaway was a huge strategy for retailers such as Marshalls and TJ Maxx. But the strategy disappeared when retailers figured out that they could instead “sell” you a store credit card, give you the item now, and then charge you ridiculous amounts of interest. Not only that, but since the customer had possession of the item, they were much more likely to make the payment on a non-standard payment schedule (read: late). That is why layaway disappeared. Don’t get it twisted.

And this is why layaway has reappeared. Consumers aren’t qualifying for the revolving credit that stores offer, therefore stores are turning to their old friend, layaway. And as you might have guessed, layaway has returned with a newfound sense of benevolence. Hooray, big business is still allowing consumers to buy things they can’t afford (Google search: sarcasm). But I would take layaway any day, over delay of pay.

About Green Candy™

Green Candy™ (www.GreenCandy.com) is an online financial assessment tool that helps Gen Y-ers and Millennials get on the right financial track before the “debt hits the fan.” Introduced by radio personality, comedian and financial expert Pete the Planner (www.PeteThePlanner.com), Green Candy’s ™ various “pods” allow users to assess their financial health and competency in common areas such as Debt, Budgeting, Investing, Charity, Risk Management and Major Purchases, as well as in areas unique to Gen Y. A subsequent series of targeted worksheets, podcasts, tip sheets, and action plans guides them to the financial promise land. Green Candy™: Get in control before the debt hits the fan.

About Pete the Planner

Pete the Planner (www.PeteThePlanner.com) is expert financial planner Peter Dunn’s super-saving alter ego. Peter is an award-winning comedian and rising star in the financial world. Named one of “Indy’s Best and Brightest” in finance in 2007 and media in 2009 by KPMG, Peter was also declared one of NUVO magazine’s “30 under 30 to Watch in the Arts” for comedy. Peter is the author of What Your Dad Never Taught You About Budgeting (2006) and is the host of the popular radio show Skills Your Dad Never Taught You on News Talk 1430 (WXNT). He blogs regularly at www.petetheplanner.com/blog. Pete appears regularly on Fox News and Fox Business as well as various CBS stations. His newest book, 60 Days to Change, is due out in November.

After tons of email asking whether I thought MLM companies were legit or a scam, I decided to find out for myself. I have been working on a story on Multi-Level Marketing (Network Marketing) for a couple of months now. I have studied 10 MLM companies and their compensation structures. I have interviewed salespeople, ex-salespeople, and a CEO of an MLM. I have learned a tremendous amount of dos and don’t, and I’m going to share them all with you.

Starting Oct 4th at 11 am on News Talk 1430 AM, I will unravel the world of mulit-level marketing. There is one thing that I am sure of, this is sure to cause controversy. I have been banned from sales rallies, I have been emailed numerous “warnings”, and I have even made some unlikely friends.

I will be previewing my story on Abdul in the Morning (1430 WXNT Indy) on Oct 1 at 8:30 am and Smiley in the Morning at 8:50 am (99.5 WZPL Indy). Tune in.

My neighborhood is having a community Garage Sale this weekend. I saw the sign on my drive to work. I never participate in these sorts of things because I’m generally freaked out by strangers milling around my garage. However, I decided that I would participate this weekend in the name of (financial) science. It’s Eat What You Earn Weekend. Okay, I made that up. But why not?

We are going to use the money we make in this impromptu Garage Sale to pay for dinner on Saturday night. If we make $20, then we eat cheap. If we make $150, then I’ll be calling a cab….kidding.

Do it.

About Green Candy™

Green Candy™ (www.GreenCandy.com) is an online financial assessment tool that helps Gen Y-ers and Millennials get on the right financial track before the “debt hits the fan.” Introduced by radio personality, comedian and financial expert Pete the Planner (www.PeteThePlanner.com), Green Candy’s ™ various “pods” allow users to assess their financial health and competency in common areas such as Debt, Budgeting, Investing, Charity, Risk Management and Major Purchases, as well as in areas unique to Gen Y. A subsequent series of targeted worksheets, podcasts, tip sheets, and action plans guides them to the financial promise land. Green Candy™: Get in control before the debt hits the fan.

About Pete the Planner

Pete the Planner (www.PeteThePlanner.com) is expert financial planner Peter Dunn’s super-saving alter ego. Peter is an award-winning comedian and rising star in the financial world. Named one of “Indy’s Best and Brightest” in finance in 2007 and media in 2009 by KPMG, Peter was also declared one of NUVO magazine’s “30 under 30 to Watch in the Arts” for comedy. Peter is the author of What Your Dad Never Taught You About Budgeting (2006) and is the host of the popular radio show Skills Your Dad Never Taught You on News Talk 1430 (WXNT). He blogs regularly at www.petetheplanner.com/blog. Pete appears regularly on Fox News and Fox Business as well as various CBS stations. His newest book, 60 Days to Change, is due out in November.

Be sure to watch Pete the Plannet in Fox News at 2:45 PM est today. I’ll be talking about the huge uproar over Overdraft fees. Find out who is to blame.

Tell your friends. Tell your family. Tell your clergy (sorry, I got carried away)

I am obsessed with spending addictions this week. I don’t know why. I talked about it on my radio show, I talked about it on Your Time with Kim Iverson, and I talked about it on The Smiley Morning Show. Many people are compulsive spenders, but that doesn’t mean that they are addicted. I interviewed Harvard trained psychotherapist, Carleton Kendrick, on my radio show. He said that even though a spending addiction is not a physiological addiction, it’s still a serious issue.

I have compiled a list of symptoms that you should consider when trying to self-diagnose.

1. Do you lie to cover up your purchases? Lying about money is a serious problem, and can really damage your relationships.

2. Are your relationships struggling? This could be a sign of your halitosis, but then again it could be a side-effect of your terrible spending habits.

3. Do you just store the stuff you buy? Spending addiction is about the purchase, not about what you purchasing. Therefore, many times addicts will buy things that they don’t  even need. Thus, storage.

If you think you have a spending problem, you should really seek help.

About Green Candy™

Green Candy™ (www.GreenCandy.com) is an online financial assessment tool that helps Gen Y-ers and Millennials get on the right financial track before the “debt hits the fan.” Introduced by radio personality, comedian and financial expert Pete the Planner (www.PeteThePlanner.com), Green Candy’s ™ various “pods” allow users to assess their financial health and competency in common areas such as Debt, Budgeting, Investing, Charity, Risk Management and Major Purchases, as well as in areas unique to Gen Y. A subsequent series of targeted worksheets, podcasts, tip sheets, and action plans guides them to the financial promise land. Green Candy™: Get in control before the debt hits the fan.

About Pete the Planner

Pete the Planner (www.PeteThePlanner.com) is expert financial planner Peter Dunn’s super-saving alter ego. Peter is an award-winning comedian and rising star in the financial world. Named one of “Indy’s Best and Brightest” in finance in 2007 and media in 2009 by KPMG, Peter was also declared one of NUVO magazine’s “30 under 30 to Watch in the Arts” for comedy. Peter is the author of What Your Dad Never Taught You About Budgeting (2006) and is the host of the popular radio show Skills Your Dad Never Taught You on News Talk 1430 (WXNT). He blogs regularly at www.petetheplanner.com/blog. Pete appears regularly on Fox News and Fox Business as well as various CBS stations. His newest book, 60 Days to Change, is due out in November.

Guest post by Jim Huller, president of Maximum Wealth Advisors

If you’re like a lot of people out there you have decreased your spending and accumulation of debt, while increasing the amount you have in savings.  A few years ago the national savings average dropped down to a negative percentage of income, meaning that the average person owed more than they had. Today out of necessity the average American has become more frugal, but it wasn’t that long ago that spending big was in vogue.

The mentality of “spend it if you got it”, led to those who didn’t to borrow it.  Now that the pendulum has swung back to thriftiness – the kind advocated by Green Candy.com – I turn today to the classic tale by Bastiat, with a modern twist, for the wisdom of saving.

Picture two friends, one a spendthrift (Purchasing Fanatic Pete) and the other a prudent man (Coupon Clipping Chip), each of whom will have an annual income of $50,000.  Pete has won the lottery, while Chip has inherited his money.

Pete is a big spender, and like Plies, he wants you to know it.  He believes if you don’t spend ALL of your money, you will add to unemployment.  Who knew spending could be so fun and patriotic at the same time?  Purchasing Fanatic Pete loves to go to all the clubs, where he can make it rain.  Of course, he has “his people” with him, and showers them with the latest gadgets from Circuit City and Sharper Image; he gives expensive gifts to his friends to “show some love” or “spread the wealth”.

To live large, Purchasing Fanatic Pete has to dip into his capital. But so what? If saving is a sin, dissaving must be a virtue; and in any case he is simply making up for the damage being done by the saving of his tightwad friend Coupon Clipping Chip.

Everyone knows and loves Pete.  Coupon Clipping Chip though, isn’t so well known. He rents videos from Netflix and drives a Toyota.  Whereas Pete spends all of his $50,000 (and then some), Chip lives modestly and only spends half of his $50,000, and banks the rest.  Since most people only see what’s in plain view, they assume Chip is adding less than half as much to employment as Pete and the other $25,000 is as useless as if it wasn’t there.

Of Chip’s $25,000 leftovers, his short-term savings goes into the bank, allowing the bank to lend it to businesses on short term for working capital.  With his long-term savings Chip invests his money in stocks, bonds, or real estate.  When Chip’s money is invested (directly or indirectly) it is used to buy or build capital goods—houses or office buildings or factories or ships or trucks or machines.  All of these projects puts as much money into circulation, and adds to employment, as much as Pete’s spending sprees do.

“Saving,” is another form of spending. The difference here is that the money is turned over to a corporation to spend on means to increase production, which is what leads to lasting employment. But most people don’t see this activity directly, and only notice the big tips our friend Pete hands out.

A dozen years roll by and Purchasing Fanatic Pete is bankrupt.  He returns his Hummer to GM (who also did a poor job of handling its business), but is unable to return his worthless trinkets to the stores he used to patronize – they’re gone now.  Pete muddles through town, saying “I used to be somebody”; he is viewed as a failure.  He turns to begging from Chip, and GM goes begging from the government.

Meanwhile Chip has continued his spending and savings regiment, and is not only providing more jobs than ever, (because of his income through investment has grown), but his investments have helped to provide better-paying and more productive jobs. His capital wealth and income are greater because of it.

Coupon Clipping Chip has added to the nation’s productive capacity and Purchasing Fanatic Pete has not.  Therein lies the problem with our current state of affairs: we’ve had too many Petes and not enough Chips.  Now that the party is over, what we need is a return to sensible economic policies – we need to encourage productivity and savings.  We also need to teach the next generation.

A new article in the Wall Street Journal suggests that college students are borrowing more money than ever before. Students are not only borrowing more money, but more students are borrowing in general. Per the Journal, this is having more severe implications than just the obvious burden of debt. Students are not buying homes or starting families as soon as they use to. This is causing ripples in the macro-economy.

In addition to the debt concerns, the article suggests that colleges and universities are misreading the situation as a whole.

Also, the rising levels of borrowing may ironically be contributing to the accelerating cost of college, say some college-finance experts. Loans can give colleges an artificial sense of a family’s ability to pay tuition. To some extent, that false sense of security gets built into the assumptions schools make when setting prices, say experts. The idea is that as prices rise, families borrow more and more, spurring prices to rise further, which in turn requires more borrowing.

Ohhhh SNAP!!! I was right. In a blog earlier this week, I suggested that IU is missing the boat with their “tuition credits” solution. Their system gives a “discount” to full time B or better students. This practice is short sited, and it will only serve to put the average student at a bigger disadvantage. 

You don’t have to agree with me, but if you don’t…take it up with the WSJ.

And I’m out.